Oberoi Buildings & Investments Pvt. Ltd., Kolkata V. ACIT, Circle-5, Kolkata, Kolkata

ITA 1640/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1494 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 08-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N O N E
• Assessee Lawyers: A K GUPTA
• Keywords: Business income
• Section: 14A

Judgement Text

1 ITA NO.1640/KOL/2014 OBEROI BUILDINGS & INV. PVT. LTD. AY 2006-07 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE .., /AND . ' # $% % , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1640/KOL/2014 ASSESSMENT YEAR: 2006-07 OBEROI BUILDINGS & INVESTMENTS PVT. LTD. (PAN: AABCO2860R) VS. ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-5, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 11.05.2017 DATE OF PRONOUNCEMENT 26.07.2017 FOR THE APPELLANT SHRI A. K. GUPTA, FCA FOR THE RESPONDENT N O N E ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LD. CIT(A)-VI, KOLKATA DATED 19.05.2014 FOR AY 2006-07. 2. AT THE OUTSET ITSELF, THE LD. AR OF THE ASSESSEE STATED THAT HE IS NOT PRESSING GROUND NO.4 WHICH IS IN RESPECT TO DISALLOWANCE U/S. 14A O F THE ACT SO, THIS GROUND OF APPEAL OF ASSESSEE STANDS DISMISSED AS NOT PRESSED. 3. THE OTHER EFFECTIVE GROUND NOS. 1 TO 3 ARE AGAIN ST THE ACTION OF THE LD. CIT(A) IN NOT ALLOWING THE CLAIM OF THE ASSESSEE THAT INCOME WHIC H IT DERIVES FROM LETTING OUT OF PROPERTY AS BUSINESS INCOME, WHEREAS THE LD. CIT(A) CONFIRM ED THE ACTION OF THE AO WHEREIN HE HELD IT AS INCOME FROM HOUSE PROPERTY. THE ASSESSE E IS A PRIVATE LIMITED CO. INCORPORATED ON 14.03.1972. ITS MAIN OBJECT FOR WHICH IT WAS ES TABLISHED US SEEN FROM CLAUSE 3 OF MEMORANDUM OF ASSOCIATION WHICH IS AS UNDER: (1) TO ACQUIRE ON A LICENSE OR BY PURCHASE, LEASE, EXCHANGE, HIRE OR OTHERWISE LANDS AND PROPERTY OF ANY TENURE, OR PREMISES IN AN Y PART OF INDIA; 2 ITA NO.1640/KOL/2014 OBEROI BUILDINGS & INV. PVT. LTD. AY 2006-07 (2) TO LICENSE OR SUB-LICENSE OR LEASE OR SUB-LEASE OR LET, SUCH LANDS OR PROPERTY OR PREMISES OR ANY PART THEREOF, AND TO PROVIDE SUCH. 4. ON 25.04.1972 THE ASSESSEE ENTERED INTO AN AGREE MENT WITH M/S. EAST INDIA HOTELS LTD. (NOW RE-NAMED AS EIH LTD.) TO ACQUIRE UNDER LI CENCE (FOR THE USE OF CERTAIN AREA EARMARKED FOR SHOPPING CENTRE) IN THE COMPANYS OBE ROI HOTEL IN MUMBAI. IN TERMS OF THIS AGREEMENT, AFTER ACQUIRING THE LICENSE IN THE SHOPP ING AREA THE ASSESSEE COMPANY GAVE SUB- LICENSE TO VARIOUS PARTIES WHO WERE INTERESTED IN S ETTING UP SHOPS THERE WITH THE CONDITION THAT THE SHOPKEEPERS HAD TO SUBSCRIBE TO A SPECIFIC NUMBER OF SHARES OF THE ASSESSEE COMPANY APART FROM PAYMENT OF MONTHLY CHARGES (TERM ED AS CONTRIBUTION FROM SHOPS). SINCE INCEPTION, THE CONTRIBUTION FROM SHOPS HAS BE EN ASSESSED AS BUSINESS INCOME. HOWEVER, IN THE AY 2005-06, THE AO HAD CHANGED THE HEAD OF SUCH INCOME FROM BUSINESS INCOME TO INCOME FROM HOUSE PROPERTY WHICH ORDER OF THE AO HAS BEEN CONFIRMED BY THE TRIBUNAL C BENCH, KOLKATA VIDE ITS ORDER DATED 23 .07.2010 IN ITA NO. 330/KOL/2008 WHEREIN IT WAS HELD AS UNDER: IN THE CASE BEFORE US, THE ASSESSEE COMPANY HAS A CQUIRED 5665 SFT. OF OFFICE SPACE FROM EIH FOR A PERIOD OF 50 YEARS AND SUBSEQUENTLY, SUB-LET IT TO DIFFERENT PERSONS ON A MONTHLY FIXED FREE/RENT. WE ARE OF THE CONSIDERED VIEW THAT THE A SSESSEE COMPANY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE HAS EXPLOITED THE OFFICE SPACE IN THE BUILDING I.E. OBEROI SHERATON HOTEL AT BOMBAY TO REALIZE THE RENTAL INCOME IN ITS OWN RIGHT AND AS SUCH THE SAID RENTAL INCOME HAS RIGHTLY BEEN ASSESSED BY THE ASSESSING O FFICER AS INCOME FROM HOUSE PROPERTY U/S 22 OF THE ACT AND NOT AS BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. ACCORDINGLY, WE VACATE THE ORDER OF THE LD. CIT(A) BY ALLOWING THE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT AND CONFIRM THE ORDER OF THE ASSESSING OFFICER. 5. FOLLOWING THE SAID ORDER OF THE TRIBUNAL THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO TREATING THE CONTRIBUTION FROM THE SHOP AS INCOM E FROM HOUSE PROPERTY AND THE CLAIM OF THE ASSESSEE THAT THE INCOME IS FROM BUSINESS INCOM E WAS REJECTED. AGGRIEVED BY THE AFORESAID ORDER OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. IT HAS BEEN BROUGHT TO OUR KNOWLEDGE BY THE LD. AR THAT THE ORDER OF THE ITAT FOR AY 2005-06 HAS BEEN STAYED BY THE HONBLE HIGH COUR T. ACCORDING TO THE LD. COUNSEL, THE HONBLE SUPREME COURT IN CHENNAI PROPERTIES & INVES TMENT LTD. VS. CIT (2015) 373 ITR 673 HAS CATEGORICALLY HELD THAT IN CASE, LETTING OF THE PROPERTIES WAS IN FACT THE BUSINESS OF 3 ITA NO.1640/KOL/2014 OBEROI BUILDINGS & INV. PVT. LTD. AY 2006-07 THE ASSESSEE, THEN THE ASSESSEE DISCLOSING THE SAME UNDER THE HEAD INCOME FROM BUSINESS HAS TO BE UPHELD AND IT CANNOT BE TREATED AS INCOME FRO M HOUSE PROPERTY. THIS PROPOSITION OF LAW HAS BEEN REITERATED BY THE HONBLE SUPREME COUR T IN ROYALA CORPORATION PVT. LTD. VS. ACIT (2016) 386 ITR 500 (SC). TAKING INTO CONSIDER ATION THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT, THE COORDINATE BENCH OF THIS TRIBUNAL B BENCH, KOLKATA IN THE CASE OF THE SISTER CONCERN OF THE ASSESSEE I.E. BOM BAY PLAZA PVT. LTD. VS. ACIT, ITA NO. 1641 & 1203/KOL/2014 FOR AYS 2006-07 AND 2007-08 WA S PLEASED TO UPHOLD THE ASSESSEES CLAIM THAT THE INCOME FROM GRANTING PREMISES ON SUB -LICENSE WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. IN THIS CASE, THE TRIBU NAL ALSO TOOK NOTE OF THE ORDER OF THE ASSESSEES CASE IN WHICH THE COORDINATE BENCH HAD D ECIDED IN FAVOUR OF THE REVENUE BY TREATING THE CONTRIBUTION RECEIVED FROM SHOP AS INC OME FROM HOUSE PROPERTY AT PARA 8 OF ITS ORDER. ON SIMILAR AND IDENTICAL FACTS THE COORDINA TE BENCH OF THE TRIBUNAL AFTER TAKING NOTE OF THE FACT THAT ASSESSEES MAIN BUSINESS WAS LETTI NG OUT OF PROPERTIES AFTER PERUSAL OF THE LEASE DEED WHICH WE FIND TO BE IDENTICAL TO THAT OF THE BOMBAY PLAZA PVT. LTD. WHEREIN ALSO THAT ASSESSEE TOOK LICENSE FROM THE EAST INDIA HOTE LS LTD., WHICH FACT IS EVIDENT FROM PAGE 10 AND 11 OF THAT ORDER. TAKING NOTE OF THESE FACT S, THE TRIBUNAL HAS BEEN PLEASED TO COME TO THE CONCLUSION THAT THE ASSESSEE CARRIED ON A SYSTE MATIC AND REGULAR ACTIVITY IN THE NATURE OF BUSINESS BY LETTING OUT PREMISES ON RENT AND, THERE FORE, THE INCOME FROM GRANTING SUB- LICENSE WAS TO BE ASSESSED UNDER THE HEAD INCOME FR OM BUSINESS. WE NOTE THAT IN THE ASSESSEES CASE FOR AY 2005-06, THE ORDER OF THE TR IBUNAL IS DATED 23.07.2010 WHEREAS THE HONBLE SUPREME COURTS DECISION IN CHENNAI PROPERT IES & INVESTMENT LTD., SUPRA, HAS BEEN PASSED ON 09.04.2015 AND THAT IN ROYALA CORPOR ATION PVT. LTD., SUPRA WAS PASSED ON 11.08.2016 SO, THESE JUDGMENTS WERE PASSED AFTER TH E TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 2005-06. IN THE INSTANT CASE, WE TAKE NOTE OF THE FACT THAT THE ASSESSEES MAIN OBJECT AS STATED IN ITS MEMORANDUM OF ASSOCIATION W AS TO ACQUIRE ON LICENSE OR BY PURCHASE, LEASE, EXCHANGE, HIRE OR OTHERWISE LANDS AND PROPERTY OF ANY TENURE, OR PREMISES IN ANY PART OF INDIA AND TO LICENSE OR SUB-LICENSE OR LEASE OR SUB-LEASE OR LET, SUCH LANDS OR PROPERTY OR PREMISES OR ANY PART THEREOF, CLEARLY S PELLS OUT THAT THE ASSESSEES MAIN BUSINESS IS TO CARRY OUT SYSTEMATIC AND REGULAR ACTIVITY IN THE NATURE OF BUSINESS OF LETTING OUT PROPERTY. THEREFORE, THE ENTIRE INCOME WHICH ACCRU ED AND WAS ASSESSED WAS FROM LETTING OUT 4 ITA NO.1640/KOL/2014 OBEROI BUILDINGS & INV. PVT. LTD. AY 2006-07 OF THESE PROPERTIES. THE ASSESSEE SHOWED THE RENTA L INCOME RECEIVED AS INCOME FROM BUSINESS IN ITS RETURN AND WE UPHOLD THE SAID CLAIM OF THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES AND THE LAW AND ON THE RATIO-DECIDEND I LAID DOWN BY THE HONBLE SUPREME COURT IN CHENNAI PROPERTIES & INVESTMENT LTD. (SUPR A) AND ROYALA CORPORATION PVT. LTD. (SUPRA). THEREFORE, WE SET ASIDE THE ORDER OF THE L D. CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE AND HOLD THAT THE INCOME FROM CONTRIBUTION RECEIVED FROM THE SHOP HAS TO BE ASSESSED AS BUSINESS INCOME. 7. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 26.07.2017 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26TH JULY, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT OBEROI BUILDING & INVESTMENTS PVT. LTD. , 4, MANGOE LANE, 6 TH FLOOR, KOLKATA-700 001. 2 RESPONDENT ACIT, CIR-5, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY